YouTube plans to launch ad-free subscription service

YouTube will potentially launch an ad-free video streaming subscription service this year, bringing the company into direct competition with companies including Netflix.

As reported by Bloomberg, Google-owned YouTube has begun sending video content creators an email detailing the plans.

In return for a monthly subscription fee, YouTube users will be able to watch content without sitting through advertisements. Within the email, YouTube says an ad-free version of YouTube is "another big step in the favor of choice," and gives consumers a more personalized experience when streaming content.

"By creating a new paid offering, we'll generate a new source of revenue which will supplement your fast growing advertising revenue," the email states.

An unnamed source told the publication that the service may debut by the end of the year. The service is also likely to include offline viewing as a sweetener to lure consumers to sign up for the monthly fee service.

Such an option will place YouTube in direct competition with companies such as Netflix and Hulu, which already offer media streaming services to consumers based on the subscription model. Netflix, for example, has risen in popularity and now accounts for almost 60 million subscribers. The company has also begun heavily investing in original content to lure additional customers into the fold -- a concept YouTube is also exploring.

While the paid subscription option will give the average consumer more choice concerning their YouTube experience, it also restricts choice for video content creators -- who will need to accept the new terms or potentially face having their videos set to private. As noted by TechCrunch, the service launch requires an update to YouTube's creator terms of service. YouTube's updated Partner Program Terms says:

"YouTube will pay you 55 percent of the total net revenues recognized by YouTube from subscription fees that are attributable to the monthly views or watchtime of your Content as a percentage of the monthly views or watchtime of all or a subset of participating content in the relevant subscription offering (as determined by YouTube). If your Content is included in and viewed by a user in multiple subscription offerings,
YouTube will pay you based on the subscription offering with the highest amount of net revenues recognized by YouTube, as calculated by YouTube."

In other words, YouTube content creators will be given a slice of total net revenues collected through subscription fees associated with their video, in the same way as advertising operates now.

While the monthly fee has not been set yet, we can estimate the rate to be around $10, based on YouTube's Music Key subscription service, which offers millions of songs stored by Google for $9.99 per month -- and also offers offline access.

"Today, mobile represents over half of all watchtime and mobile revenue is up 200 percent in the last year. Just as with mobile, we're confident the latest contract update will excite your fans and generate a previously untapped, additional source of revenue for you," YouTube says in the email.

"It's an exciting year for YouTube as we push ourselves into uncharted territories.But we continue to be guided by a desire to deliver the choices fans want and the revenue you need."

While a monthly fee to live an ad-free life is likely to appeal to some -- myself included -- if we estimate the fee to be around $10, this might be considered a little steep. However, if a website with billions of unique hits a month is going to support its content creators while also stripping itself of advertising, then the premium service needs to be worthwhile for both YouTube and video uploaders.

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